Social media giant Facebook Inc (NASDAQ:FB) is set to report its latest quarterly earnings on Wednesday, Feb. 1, after the close of trading. Facebook stock has risen sharply thus far in the first few weeks of 2017, and it now offers active investors and traders clear technical levels to focus around for a pair of trading opportunities.
When I last mused about FB stock in this column on Jan. 6, I offered that shares had reached critical technical support in the previous two months, and that if the stock could overcome a “confluence zone” area of resistance around $121 on a weekly closing basis, upside could begin to accelerate.
Since then, Facebook stock has rallied 10%, and just last week it reached its previous all-time highs from October 2016.
Facebook Stock Charts
On the multiyear weekly chart, let me once more point out the critical technical support area that FB bounced off in January.
The November-January lows in the stock lined up with the very lower end of the multiyear up-trending channel, as well as the 50-week simple moving average (yellow), which also roughly lines up with the 200-day simple moving average. This confluence area of support was critical for Facebook stock to hold.
Once investors trusted this low to hold, around Jan. 6, upside began to accelerate.
However, we also can see that despite the most recent multiweek rally, FB stock through this lens still could have further upside to the upper end of the multiyear up-trending channel, which currently sits near the $140 mark.
On the daily chart, so as to see both sides, we also must respect the current overbought reading of the stock’s momentum oscillators.
The last time FB stock saw its MACD momentum oscillator (bottom of chart) at such lofty levels, it was November 2015, and the stock proceeded to drop more than 15% over the ensuing two months.
To be clear, momentum oscillators can remain in overbought conditions for some time, and an overbought oscillator alone is not enough to cause alarm.
So, moving into Wednesday’s earnings report, there are two specific price areas that active investors and traders in Facebook stock could focus around:
- The area around $140, which as mentioned earlier represents the upper end of the multiyear channel from the above chart. Through a multiweek/multimonth lens, if FB moves into this area following the earnings report, odds should favor selling some stock. Or, if you’re a more aggressive trader, bearish strategies including selling out-of-the-money call spreads or even shorting Facebook stock would make sense.
- Should the stock gap lower following the earnings report, then the next area of technical support comes in around $120-$125. Any meaningful bullish reversal in this zone could once again offer better odds for bullish trades back toward the upper end of the longer-standing channel.
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